MICROFINANCE WRAP-UP: Microfinance Synergies and Trade-offs: Social versus Financial Performance Outcomes in 2008, by Adrian Gonzalez, Published by The Microfinance Information Exchange (MIX)

By Adrian Gonzalez, published by the Microfinance Information Exchange (MIX), August 2010, 15 pages, available at http://www.themix.org/sites/default/files/MIX%20Data%20Brief%207.pdf.

Adrian Gonzalez, a lead researcher for the Microfinance Information Exchange (MIX), conducted an econometric analysis to investigate whether there is a tradeoff between social performance (SP) and financial performance (FP) among microfinance institutions (MFIs) that reported data to MIX for the year 2008. He used a sample size of 200 MFIs reporting SP data and 1600 MFIs reporting FP data. The SP indicators used are those employed by the Social Performance Task Force (SPTF).

According to Mr Gonzalez, investments in human capital are correlated with higher staff productivity and better portfolio quality, but these same investments in human capital are correlated with lower efficiency. He found these correlations to hold true regardless of loan size. He also found that targeting mostly very poor borrowers increases the cost to borrowers by an average of 2 percent due to the cost of outreach.

He also found that rural MFIs have higher rates of productivity and efficiency than urban MFIs and posits that this may be because rural MFIs, contrary to popular belief, are not always more spread out geographically than urban MFIs. Therefore, travel time and travel costs for loan officers may actually be lower for rural MFIs. He also found that the seeking out of poorer clients (targeting policies) is related to lower productivity and efficiency, since targeting policies tend to create extra costs for MFIs.

The author makes several recommendations for the improvement of SPTF indicators. He suggests that the SPTF questionnaire for MFIs should be more detailed and expanded from its current ?yes/no? format. He also comments that the current questionnaire does not separate general polices related to staff such as general training and appraisal from policies focused solely on SP such as SP-specific training. He recommends that a new questionnaire separate these two factors, since it is unlikely that an MFI would offer SP policies without general policies (training and appraisal) already being in place. The effects of SP policies could then be analyzed separately from the effects of general policies.

By Julia Korn, Research Associate

About The Social Performance Task Force (SPTF):

The Social Performance Task Force (SPTF) was created in 2005 and consists of approximately 650 leaders from microfinance stakeholder groups including practitioners, donors and investors (multilateral, bilateral and private), national and regional networks, technical assistance providers, rating agencies, academics and others. It has been charged with clearly defining social performance and addressing questions about measuring and managing social performance. According to SPTF, social performance includes operating ?in line with accepted social values that relate to serving larger numbers of poor and excluded people.?

About The Microfinance Information Exchange (MIX):

Established in 2002, Microfinance Information Exchange (MIX) is a nonprofit organization with headquarters in Washington, DC, and regional offices in Peru, Senegal, India and Indonesia. It operates a global, web-based, microfinance information platform. MIX provides detailed financial and social performance information from microfinance institutions (MFIs), as well as business information from market facilitators, donor organizations and investors in microfinance. MIX Market, one of MIX?s products, provides online data on 1800 MFIs and 100 investors as of 2010. MIX was founded by CGAP (Consultative Group to Assist the Poor) and is sponsored by Citi Foundation, Deutsche Bank Americas Foundation, International Fund for Agricultural Development (IFAD) and the Bill & Melinda Gates Foundation.

Additional Resources:

MicroCapital Universe. Social Performance Task Force. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Social+Performance+Task+Force

MicroCapital Universe. Microfinance Information Exchange. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Information+Exchange+%28MIX%29

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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